Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On July 18, 2018, Independence Contract Drilling, Inc. (the “Company” or “ICD”), Patriot Saratoga Merger Sub, LLC, a wholly owned subsidiary of the Company (“Merger Sub”), Sidewinder Drilling LLC (“Sidewinder”) and MSD Credit Opportunity Master Fund, L.P., as Members’ Representative, entered into a definitive merger agreement (the “Merger Agreement”) pursuant to which Merger Sub will merge with and into Sidewinder (the “Merger”), with Sidewinder surviving the merger and becoming a wholly owned subsidiary of the Company. Pursuant to the terms of the Merger Agreement, Sidewinder Series A members will receive 36,752,657 shares of the Company’s common stock (the “Specified Parent Common Stock”) in exchange for 100% of the outstanding member units of Sidewinder. The Merger will be accounted for using the acquisition method of accounting with the Company identified as the accounting acquirer.

Sidewinder owns 15 AC drilling rigs and four modern 1500hp SCR rigs, each marketed or operating in the Permian or Haynesville plays. Sidewinder also owns four smaller 1000hp SCR rigs and one smaller 1000hp AC rig, which ICD will use for spare equipment and does not intend to market following the Merger.

In addition, Sidewinder owns 11 mechanical rigs and related equipment located in the Utica and Marcellus plays. As these rigs are not consistent with ICD’s core strategy or geographic focus, ICD has agreed that these rigs can be disposed, with the Sidewinder unitholders receiving the net proceeds. Thus, in addition to the Specified Parent Common Stock, the Sidewinder Series A Members will be entitled to receive such member’s share of any Mechanical Rig Net Sales (as defined by the Merger Agreement), payable in accordance with the Merger Agreement to the extent such proceeds have not either been used to repay certain Sidewinder indebtedness or been paid as a dividend to the Sidewinder members prior to the closing of the Merger.

The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2018 and the year ended December 31, 2017 combine the historical statements of operations of the Company and Sidewinder, giving effect to the Merger as if it had occurred on January 1, 2017. The unaudited pro forma condensed combined balance sheet as of June 30, 2018 combines the historical condensed balance sheets of the Company and Sidewinder, giving effect to the Merger as if it had occurred on June 30, 2018. The historical condensed consolidated financial statements have been adjusted in the unaudited pro forma condensed combined financial statements to give effect to events that are (1) directly attributable to the Merger, (2) factually supportable and (3) with respect to the statements of operations, expected to have a continuing impact on the combined company’s results. The unaudited pro forma condensed combined financial statements are based on and should be read in conjunction with:

The unaudited pro forma condensed combined financial statements have been presented for informational purposes only. Such pro forma information is not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the Merger been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial statements do not purport to project the future financial position or operating results of the combined company.

The unaudited pro forma condensed combined financial statements do not reflect any cost savings or operating synergies that the combined company may achieve as a result of the merger, the costs to integrate the operations of the Company and Sidewinder, or the costs necessary to achieve any such cost savings or operating synergies.

See notes to unaudited pro forma condensed combined financial statements

See notes to unaudited pro forma condensed combined financial statements

See notes to unaudited pro forma condensed combined financial statements

INDEPENDENCE CONTRACT DRILLING, INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1. Description of Transaction

On July 18, 2018, Independence Contract Drilling, Inc. (the “Company” or “ICD”), Patriot Saratoga Merger Sub, LLC, a wholly owned subsidiary of the Company (“Merger Sub”), Sidewinder Drilling LLC (“Sidewinder”) and MSD Credit Opportunity Master Fund, L.P., as Members’ Representative, entered into a definitive merger agreement (the “Merger Agreement”) pursuant to which Merger Sub will merge with and into Sidewinder (the “Merger”), with Sidewinder surviving the merger and becoming a wholly owned subsidiary of the Company. Pursuant to the terms of the Merger Agreement, Sidewinder Series A members will receive 36,752,657 shares of the Company’s common stock (the “Specified Parent Common Stock”) in exchange for 100% of the outstanding Series A Common Units of Sidewinder (the “Series A Common Units”). The Merger will be accounted for using the acquisition method of accounting with the Company identified as the accounting acquirer. The Series C Units of Sidewinder will be cancelled pursuant to the Merger Agreement.

Sidewinder owns 15 AC drilling rigs and four modern 1500hp SCR rigs, each marketed or operating in the Permian or Haynesville plays. Sidewinder also owns four smaller 1000hp SCR rigs and one smaller 1000hp AC rig, which ICD will use for spare equipment and does not intend to market following the Merger.

In addition, Sidewinder owns 11 mechanical rigs and related equipment located in the Utica and Marcellus plays. As these rigs are not consistent with ICD’s core strategy or geographic focus, ICD has agreed that these rigs can be disposed, with the Sidewinder unitholders receiving the net proceeds. Thus, in addition to the Specified Parent Common Stock, the Sidewinder Series A Members will be entitled to receive such member’s share of any Mechanical Rig Net Sales (as defined by the Merger Agreement), payable in accordance with the Merger Agreement to the extent such proceeds have not either been used to repay certain Sidewinder indebtedness or been paid as a dividend to the Sidewinder members prior to the closing of the Merger.

In order to finance (i) a portion of the consideration of the Merger and to pay fees, commissions, severance and other expenses and costs related thereto, (ii) the repayment of a fixed amount of outstanding Sidewinder’s first lien notes ($58.5 million), (iii) the repayment of any Sidewinder debt under its revolving credit agreement, (iv) the repayment of the Company’s debt under its revolving credit agreement and (v) other transaction expenses, the Company expects to incur indebtedness of up to $130.0 million pursuant to the new Credit Facilities as defined below.

In connection with the Merger, the Company has entered into a commitment letter with MSD Partners (the “Term Loan Commitment Letter”). Pursuant to the Term Loan Commitment Letter, the Company has received commitments for (a) a senior secured term loan facility in an aggregate principal amount of up to $130.0 million (the “Term Loan Facility”) and (b) a delayed draw term loan facility in an aggregate principal amount of up to $15.0 million (the “DDTL Facility”, and together with the Term Loan Facility, the “Term Facilities”), with the proceeds of the Term Loan Facility being used by the Company

to repay outstanding indebtedness of Sidewinder and of the Company as of the closing of the Merger. The Term Facilities will be a no-amortization loan with a maturity date five years after the execution date. The Term Facilities bear interest at LIBOR plus 7.5% and will be secured by a first priority lien on collateral (the “Term Priority Collateral”) other than accounts receivable, deposit accounts and other related collateral pledged as first priority collateral (“Priority Collateral”) under the ABL Credit Facility (defined below) and a second priority lien on such Priority Collateral.

In addition, the Company has entered into a commitment letter with Wells Fargo, National Association (the “ABL Commitment Letter”) with respect to a revolving senior secured credit facility (the “ABL Credit Facility”). Pursuant to the ABL Credit Facility, the Company has commitments for borrowing capacity of up to $40.0 million, including availability for letters of credit in an aggregate amount at any time outstanding not to exceed $7.5 million. Availability under the ABL Credit Facility will be subject to a borrowing base determined based on 85% of the net amount of eligible accounts of the Company, minus reserves. The ABL Credit Facility will be secured by a first priority lien on Priority Collateral, which will include all accounts receivable and deposit accounts, and a second priority lien on the Term Priority Collateral.

We collectively refer to the Term Facilities and the New ABL Credit Facility as the “Credit Facilities”.

On July 18, 2018, Sidewinder, all of the holders of their Series A Common Units, all of the holders of their Secured Notes due February 15, 2020 (“First Lien Notes”) and all of the holders of their Amended and Restated Secured Notes due February 15, 2020 (“Second Lien Notes”) entered into the Contribution, Exchange and Restructuring Agreement. Pursuant to the agreement and immediately prior to the closing of the Merger, the holders of the First Lien Notes will contribute a portion of their notes, and the holders of the Second Lien Notes will contribute all of their notes, in each case together with accrued and unpaid interest, in exchange for newly issued Series A Common Units of Sidewinder.

On July 18, 2018, Sidewinder entered into an agreement with certain holders of its Second Lien Notes to repurchase such notes, together with accrued and unpaid interest for an aggregate purchase price of approximately $6.5 million.

2. Basis of Presentation

The unaudited pro forma condensed combined financial statements are provided for illustrative purposes only and are not intended to represent the consolidated results of operations or financial position of the combined company that would have been recorded had the merger been completed as of the dates presented and should not be taken as representative of future results of operations or financial position of the combined company. The unaudited pro forma condensed combined financial statements do not reflect the impacts of any potential operational efficiencies, cost savings or economies of scale that the combined company may achieve with respect to the combined operations of the Company and Sidewinder. Additionally, the pro forma statements of operations do not include non-recurring expenses or gains and the related tax effects that result directly from the Merger. The Merger represents a change of control as defined under the Company’s 2012 Omnibus Long-Term Incentive Plan, which will result in the vesting or forfeiture of all of the Company’s outstanding stock-based compensation awards. This will result in a non-cash charge estimated at $2.6 million that is not reflected in these unaudited pro forma condensed combined financial statements.

The Merger is reflected in the unaudited pro forma condensed combined financial statements using the acquisition method of accounting. As such, the total estimated purchase price as described in Note 3, will be measured at the closing date of the Merger using the market price of the Company’s common stock on that date. This may result in a different value for the merger consideration than that assumed for purposes of preparing these unaudited pro forma condensed combined financial statements. The assets and liabilities of Sidewinder have been adjusted to fair value based on various preliminary estimates using assumptions that the Company’s management believes are reasonable and using information that is currently available. Upon closing the Merger, additional information will be available that could materially affect these estimates. Additionally, many of these fair value measurements can be highly subjective, and it is possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts. To the extent these preliminary estimates are refined and revised based on updated information at closing, materially different values may result.

An excess of the purchase price over the estimated fair values of identified assets and liabilities will be allocated to goodwill, while a shortfall will be recognized as a bargain purchase gain.

Upon completion of the Merger, further review of Sidewinder’s accounting policies and financial statement presentation may result in revisions to Sidewinder’s historical presentation and classification to conform to the Company’s presentation and classification.

The unaudited pro forma condensed combined financial statements should be read in conjunction with the historical financial statements of the Company and accompanying notes filed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, and the Company’s Quarterly Report on Form 10-Q for the six months ended June 30, 2018, as well as Sidewinder’s historical financial statements included in Exhibit 99.2 to this Form 8-K.

3. Estimated Merger Related Consideration and Purchase Price Allocation

Under the terms of the Merger Agreement, the Company will issue an aggregate 36,752,657 shares of the Company’s common stock in exchange for 100% of the outstanding Sidewinder member units. Additionally, the Company will repay $58.5 million of Sidewinder’s existing indebtedness at the closing of the Merger. Using the closing price of $3.85, the Company’s common stock on August 14, 2018, the following represents the estimate of merger related consideration:

The value of the final merger consideration will fluctuate based upon changes in the Company’s share price at the closing date. This will likely result in a difference in the value the equity component of the merger consideration used in these unaudited pro forma condensed combined financial statements, and that difference may be material.

Assuming a 10% change in the market price of the Company’s common stock, the estimated merger consideration would increase or decrease by approximately $14.1 million. Such an increase or decrease would result in a corresponding increase or decrease to the bargain purchase gain.

The following is a preliminary allocation of the merger related consideration to the assets to be acquired and liabilities to be assumed:

When the fair value assigned to the net assets acquired exceeds the consideration transferred in an acquisition, the difference is reflected as a bargain purchase gain. The bargain purchase gain in this transaction is primarily attributable to the significantly depressed land drilling industry market capitalizations since the downturn that began in late-2014. These depressed market capitalizations imply fair values which are below the fair values of the net assets estimated by the Company’s management.

4. Adjustments

A. Represents the conversion of $89.6 million of Sidewinder’s historical indebtedness, along with accrued and unpaid interest, both current and long-term, to equity just prior to, and in connection with, the merger transaction pursuant to Sidewinder’s Contribution, Exchange and Restructuring Agreement. Also reflects the repurchase of $6.5 million of notes by Sidewinder pursuant to an agreement with a Second Lien Note holder.

B. Represents a reclass of Sidewinder inventories to conform to the Company’s presentation.

C. Represents a reclassification of Sidewinder’s mechanical rigs from property, plant and equipment, net to assets held for sale. The Company’s business strategy is focused entirely on the operation of pad-optimal drilling rigs within the geographic areas of Texas and its contiguous states, which differs from Sidewinder’s historical business strategy, which included the marketing of mechanical rigs, as well as operations in the Utica and Bakken resource plays. As a result of this change in operating strategy, pursuant to the merger agreement, these rigs will not be operated by the Company, but will be held for sale, with 100% of any net proceeds being paid to the members of Sidewinder.

D. Represents the pro forma adjustments to cash and cash equivalents as follows (in thousands):

The pro forma adjustments to cash and cash equivalents reflect the proceeds of the new term loan, which will be used primarily to repay the historical indebtedness of the Company and Sidewinder, together with accrued and unpaid interest, as well as to pay the related debt issuance costs on the new Term Loan Facility and the new ABL Credit Facility.

E. To reduce the carrying amount of the mechanical rigs held for sale for the benefit of the Sidewinder members to their estimated fair value less the estimated costs to sell to sell the rigs.

F. To eliminate Sidewinders historical deferred expenses associated with drilling contracts related to deferred mobilization costs.

G. Represents the pro forma adjustment to record Sidewinder property plant and equipment at its estimated fair value, excluding the mechanical rigs that will not be operated by the Company and have been reclassified to assets held for sale.

H. To eliminate the historical intangible assets of Sidewinder.

I. Represents the pro forma adjustments to other long-term assets, net as follows (in thousands):

J. Represents the pro forma adjustments to accounts payable and accrued liabilities as follows (in thousands):

The pro forma adjustment for the Company’s transaction costs include advisory and legal fees, as well as retention and severance payments. These amounts will be expensed as incurred, and while not reflected in the unaudited pro forma condensed combined statements of operations because they will not have a continuing impact to the combined company’s results of operations, they are however reflected as an adjustment to retained earnings on the pro forma balance sheets.

The pro forma adjustment of Sidewinder transaction costs include advisory and legal fees as well as amounts relating to employee benefits such as change in control payments. These amounts will be expensed by Sidewinder as incurred and are not reflected in the unaudited pro forma condensed combined statements of operations because they will not have a continuing impact to the combined company’s results of operations.

The pro forma adjustment to eliminate Sidewinder historical deferred revenues are primarily related to mobilization revenues that were previously paid by a customer as compensation to mobilize a rig to the drilling location. Such payments are deferred and amortized over the term of the related drilling contract. The deferred revenue does not represent future obligations of the Company and are eliminated from the pro forma financial statements.

The pro forma adjustment to record the estimated fair value of Sidewinder drilling contracts represents the intangible liabilities recognized for drilling contracts in place at the pro forma balance sheet date that have unfavorable contract terms as compared to current market day rates for comparable drilling rigs. The various factors considered in the pro forma adjustment are (1) the contracted day rate for each contract, (2) the remaining term of each contract, (3) the rig class and (4) the market conditions for each respective rig class at the pro forma balance sheet date. The intangible liabilities are computed based on the present value of the difference in cash inflows over the remaining contract term as compared to a hypothetical contract with the same remaining term at an estimated current market day rate using a risk-adjusted discount rate. The computed amount is subject to change based on contract positions and market conditions at the closing date of the merger. This balance will be amortized to operating revenues over the remaining contract terms on a straight-line basis. The remaining terms of these contracts range from 1 to 14 months, with a weighted average term of approximately 4 months.

K. Represents the pro forma adjustments to long-term debt as follows (in thousands):

L. To record the contingent consideration expected to be paid to the members of Sidewinder upon the sale of the mechanical rigs. This amount has been recorded at the estimated fair value of the mechanical rigs less the expected costs to sell.

M. Represents the pro forma adjustments to total equity as follows (in thousands):

N. To eliminate the historical results of operations for the Sidewinder mechanical rigs that will not be operated by the Company, and are expected to be disposed of at or after the closing of the Merger.

O. Represents the pro forma adjustments for selling, general and administrative expense as follows:

P. Represents the pro forma adjustments to depreciation expense as follows (in thousands):

The pro forma depreciation adjustments relate to the pro forma adjustment to record the estimated fair value of Sidewinder’s drilling rigs and related equipment after conforming depreciable lives and salvage values and computing depreciation using the straight-line method. The Sidewinder rigs were depreciated over their remaining estimated useful lives of between 5 and 13 years for these unaudited pro forma condensed combined financial statements.

Q. Represents the pro forma adjustments to interest expense as follows (in thousands):

The new term loan bears interest at LIBOR plus 7.5%, and a rate of 9.81% was assumed for these unaudited pro forma condensed combined financial statements.

R. Represents the pro forma adjustment for the Company’s shares of common stock issued to Sidewinder Series A members upon closing of the Merger.

S. To record the amortization of the intangible liability associated with Sidewinder’s drilling contracts that were at dayrates that were below the required returns on working capital, fixed assets and an assembled workforce, as if it had been amortized beginning on January 1, 2017.

T. Represents the pro forma adjustments to depreciation expense as follows (in thousands):

The pro forma depreciation adjustments relate to the pro forma adjustment to record the estimated fair value of Sidewinder’s drilling rigs and related equipment after conforming depreciable lives and salvage values and computing depreciation using the straight-line method. The Sidewinder rigs were depreciated over their remaining estimated useful lives of between 5 and 13 years for these unaudited pro forma condensed combined financial statements.

U. Represents the pro forma adjustments to interest expense as follows (in thousands):

The new term loan bears interest at LIBOR plus 7.5%, and a rate of 9.81% was assumed for these unaudited pro forma condensed combined financial statements.

V. To record the tax impact of the pro forma adjustments.

See accompanying notes.

1

See accompanying notes.

2

See accompanying notes.

3

See accompanying notes.

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SIDEWINDER DRILLING LLC

SIDEWINDER DRILLING LLC

Notes to Condensed Financial Statements

June 30, 2018

Actual results could differ from such estimates. We may be required to recognize additional losses in future periods related to impairment of long-lived assets if significant unfavorable changes occur to actual or projected dayrates, rig utilization or operating costs.

Assets Held for Sale

As of June 30, 2018, assets held for sale of $0.53 million include the estimated fair value less costs to sell of an idle facility. As of December 31, 2017, assets held for sale of $1.65 million included the estimated value less costs to sell of three idle properties, including land and buildings totaling $1.38 million, and of three mechanical drilling rigs totaling $0.27 million. During the first quarter of 2018, the Company sold two of the properties and the three mechanical drilling rigs, received proceeds totaling $1.24 million, and recorded a gain on the disposals of assets held for sale of $0.2 million.

Operating Revenue and Costs

Contract drilling revenues are recognized as they are earned, based on contractual daily rates. Revenues earned related to mobilization and capital upgrades are deferred and recognized over the estimated primary contract term on a straight-line basis, which is consistent with the general pace of activity, level of services being provided and dayrates being earned over the life of the contract. Upon completion of drilling contracts, any demobilization fees received are recognized in our statement of operations, as are any related expenses.

Other operating revenue includes revenue from recharges. Revenue from recharges are billings to our customers for reimbursement of equipment rentals, supplies, third-party services, client requested incentive compensation paid to our employees and other expenses that we recognize in operating and maintenance costs, the result of which has little effect on operating income. Additionally, other operating revenue for the six months ended June 30, 2018 and the period from February 15, 2017 to June 30, 2017 includes $0.2 million and $2.2 million, respectively, in amortization of the long-term liability, order backlog intangible, as discussed in Note 3 Business Combinations.

The actual costs incurred for capital upgrades are capitalized and depreciated over the estimated useful life of the related asset. For the initial mobilization of newly constructed assets, the related costs to mobilize the rig to its first operating location are capitalized and depreciated over the estimated useful life of the asset. For subsequent drilling contracts, the incremental costs directly related to contract preparation and mobilization are deferred and amortized over the estimated primary term of the drilling contract on a straight-line basis. The costs of relocating assets without contracts are expensed as incurred.

Income Taxes (Successor)

The Company is a limited liability company treated as a partnership for income tax purposes and, as such, is a pass-through entity that is not liable for income tax in the jurisdictions in which it operates, with the exception of the state of Texas, where limited liability companies are subject to Texas margin tax.

Income Taxes (Predecessor)

SDI recorded deferred tax assets and liabilities for the future tax consequences of temporary differences between the basis of existing assets and liabilities calculated according to GAAP and their respective basis for income tax purposes. A deferred tax asset was reduced by a valuation allowance when, based on the SDI’s estimates, it was more likely than not that a portion of those assets would not be realized in a future period. SDI recognized interest and penalties relating to income tax matters as a component of income tax expense.

Subsequent Events

We evaluated subsequent events through August 13, 2018, the date our financial statements were available to be issued.

On July 19, 2018 Independence Contract Drilling, Inc. (NYSE: ICD) (“ICD”) and Sidewinder Drilling, LLC jointly announced their entry into a definitive merger agreement pursuant to which ICD will acquire all of the outstanding equity interests in Sidewinder.

Under the terms of the transaction, the Sidewinder unitholders will receive an aggregate of 36,752,657 shares of ICD common stock, representing approximately 49% of the total outstanding shares immediately following the close of the transaction. ICD will also assume an estimated $50 million of Sidewinder net debt at closing.

The merger agreement and merger have been unanimously approved by the boards of directors of both companies and have received the requisite approval of the unitholders of Sidewinder.

6

SIDEWINDER DRILLING LLC

Notes to Condensed Financial Statements

June 30, 2018

Pursuant to the merger, Sidewinder will leave the Appalachian market (Marcellus and Utica) and facilitate the sales of the mechanical rigs utilized therein.

During July, Sidewinder received two payments totaling over $2.5 million from the bankruptcy court on behalf of REX Energy in payments of secured receivables which were reserved for at 85%. In July we reversed $2.0 million of bad debt expense which brought the balance in Allowance for Doubtful Accounts to $1.2 million which is the equal to the total remaining unsecured debt.

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers , which requires an entity to identify the performance obligations and determine the transaction price in a contract, allocate the transaction price to the performance obligations and recognize revenue as the entity satisfies the performance obligations. The standard also specifies the accounting for costs to obtain or fulfill a contract with a customer that may be either deferred and amortized or expensed as incurred depending on the circumstances. The standard will require more extensive disclosures including qualitative and quantitative information about our contracts and the significant judgments and changes in judgment used in determining the performance obligations, transaction prices and timing of revenue recognition and any assets recognized from the costs to obtain or fulfill a contract. The requirements must be reported retrospectively by either restating all periods presented or by recognizing the cumulative effect at the date of initial application. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date by one year and allows early application, but no earlier than the original effective date. Under the deferral, the requirements for the Company are effective for annual reporting periods beginning on or after December 15, 2018 and interim reporting periods within annual reporting periods beginning after December 15, 2019. The FASB has also issued several technical corrections and improvements to ASU No. 2014-09, which have the same effective date. We are currently assessing the effects of the pronouncement on the way we recognize and disclose revenue and we have not determined the implementation method or the expected impact, if any, it will have on our financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases , which requires recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. The requirements are effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. Lessees and lessors will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of practical expedients that entities may elect to apply relating to leases that commenced before the effective date. We have not yet evaluated the requirements of ASU No. 2016-02 nor determined our implementation method upon adoption or what impact adoption will have on our financial statements.

In June 2016, the FASB issued ASU No. 2016-13,  Financial Instruments — Credit Losses . The amendments in this update replace the incurred loss impairment methodology in current use with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Entities will apply the new guidance as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The update is effective for the fiscal years beginning after December 15, 2020, and interim periods therein. Early adoption is permitted. We are currently evaluating the impact that the adoption of ASU 2016-13 will have on our financial statements.

3. Business Acquisition

The Merger of SDI with and into the Company was completed on February 15, 2017 in conjunction with the restructuring of SDI. The Merger was accounted for using the acquisition method of accounting under FASB Accounting Standards Codification (“ASC”) 805, Business Combinations and ASC 820, Fair Value Measurements , with the Company as the acquirer. SDI’s assets acquired and liabilities assumed were recorded at their fair values on the date of the Merger as determined by an independent valuation. The fair value of assets and liabilities was determined using level 3 inputs as defined by ASC 820.

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SIDEWINDER DRILLING LLC

Notes to Condensed Financial Statements

June 30, 2018

Effective with the Merger, all of SDI’s outstanding common shares and equity awards were cancelled without receiving a distribution, and substantially all of SDI’s preferred shares outstanding were exchanged for Series C Units of the Company. SDI’s management, including the executive team, remained with the Company following the Merger.

The restructuring of SDI was completed on February 15, 2017 pursuant to the transactions set forth in the Contribution, Exchange and Restructuring Agreement (“the Restructuring Transactions”) executed by SDI, certain preferred stockholders of SDI, the Second Lien Noteholders (Predecessor) and the Third Lien Noteholders (Predecessor). The Restructuring Transactions consisted of the following: (i) delivery of the Third Lien Notes by the Third Lien Noteholders to the Company in exchange for Series A Units in the Company, (ii) the Merger described in the second preceding paragraph, (iii) the issuance and sale by the Company of Floating Rate Secured Notes due February 15, 2020 with an aggregate principal amount of $80,000,000 for cash; (iv) completion of the transactions contemplated by the Purchase Agreement between SDI and the Senior Noteholders using proceeds of $17.6 million from the sale of the Floating Rate Secured Notes to retire the Senior Note obligation; (v) the obligations outstanding under the Amended Revolver of $27.2 million were paid in full in cash using proceeds from the sale of the Floating Rate Secured Notes; (v) the Company and the Second Lien Noteholders executed an amendment and restatement of the Second Lien Note Purchase Agreement, whereby the original Second Lien Notes outstanding were exchanged for Amended and Restated Secured Notes with a due date of February 15, 2020 and with a principal value of $54.8 million; and (vi) payment of the costs and expenses of SDI of approximately $5.4 million related to the Restructuring Transactions using proceeds from the Floating Rate Secured Notes.

The following table summarizes the fair value of net assets acquired in the Merger (in thousands):

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SIDEWINDER DRILLING LLC

Notes to Condensed Financial Statements

June 30, 2018

A detail of intangible assets and other long-term liabilities as of June 30, 2018 and December 31, 2017 is as follows:

Goodwill as of the acquisition date was measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed and represents the fair value of the going- concern element of SDI. The Company does not anticipate that goodwill, intangible assets and the other long-term liability will be deductible as an expense or recognized as income in determining taxable income. We assessed goodwill for impairment as of June 30, 2018 and recorded an impairment reserve of $2.4 million.

The other long-term liability is related to the order backlog of the Predecessor as of the date of the Merger and represents the fair value of the estimated discounted cash flows for the order backlog less contributory asset charges consisting of required returns on working capital, fixed assets and assembled workforce. The other long-term liability was amortized ratably over the life of the order backlog and is included in other operating revenue.

4. Debt

A summary of debt at June 30, 2018 and December 31, 2017 is below (in thousands):

Floating Rate Secured Notes

The First Lien Note Purchase Agreement was executed on February 15, 2017, and the Company issued Floating Rate Secured Notes due February 15, 2020 in an aggregate principal value of $80,000,000 and received cash proceeds of the same amount. The Floating Rate Secured Notes are secured by a first priority lien on substantially all the assets of the Company (subject to the collateral rights of the Credit Facility discussed below) and are subject to a floating interest rate

9

SIDEWINDER DRILLING LLC

Notes to Condensed Financial Statements

June 30, 2018

generally calculated as the greater of LIBOR or 3% plus an interest rate margin of 7% (adjustments to the floating interest rate may occur subject to the availability of the required LIBOR rate). At each interest payment date (February 15, May 15, August 15, and November 15) the Company is required to pay interest in cash on $20 million of principal amount and has an option to pay interest in kind on the remaining principal balance; the amount of any such interest in kind is added to the principal balance outstanding of the Floating Rate Secured Notes at such interest payment date and thereafter bears interest at the floating interest rate. Interest expense included in the statement of operations for the six months ended June 30, 2018 totaled $4.3 million. $1.0 million was paid in cash and $3.3 million was added to the principal amount outstanding of the Floating Rate Secured Notes. The Company may repay the Floating Rate Secured Notes at any time.

As of June 30, 2018, certain of the Floating Rate Secured Notes Noteholders are also holders of the Series A Units of the Company.

The First Lien Note Purchase Agreement includes an Accordion Facility of $10 million, and the Company may offer notes for purchase to the Floating Rate Secured Noteholders under the same terms including interest rate and maturity date as the Floating Rate Secured Notes, subject to certain limitations and in increments of no less than $1 million. The Floating Rate Secured Noteholders have the option to purchase the Accordion Notes at each offering.

Amended and Restated Secured Notes

The Amended and Restated Secured Notes bear interest at 12% and are due on February 15, 2020. Interest is payable at the end of each calendar quarter; in lieu of making interest payments in cash, the Company is required to add the interest accrued for each quarter to the outstanding principal. Interest expense included in the statement of operations for the six months ended June 30, 2018 and the period from February 15 to June 30, 2017 in the amount of $1.82 million and $0.84 million, respectively, was added to the principal outstanding of the Amended and Restated Secured Notes . The Amended and Restated Secured Notes are secured by a first priority lien on substantially all of the assets of the Company, subject to the collateral rights of the Credit Facility discussed below and the Floating Rate Secured Notes.

The Amended and Restated Second Lien Note Purchase Agreement includes an Accordion Facility of $10 million, subject to similar terms as those described above for the First Lien Note Purchase Agreement. Certain of the Amended and Restated Secured Noteholders are holders of the Series A and Series C Units of the Company.

The covenants under the First Lien Note Purchase Agreement and the Amended and Restated Second Lien Note Purchase Agreement include customary affirmative and negative covenants for financing of this type, including without limitation compliance with laws, insurance requirements, payment of taxes, maintenance of books and records, covenants limiting other indebtedness, liens, investments, guaranties of indebtedness, transactions with affiliates, sales of assets, capital expenditures, conduct of business and change in fiscal year, in each case, subject to certain exceptions and baskets.

Revolving Credit Facility

On November 15, 2017, we entered into a revolving credit and security agreement (the “Credit Agreement”) for a $20,000,000 senior secured revolving loan facility (the “Credit Facility”) with Wells Fargo Bank, National Association (“Lender”). The Credit Facility has a maturity date of November 15, 2019.

Borrowings under the Credit Facility accrue interest at an optional rate per annum equal to either (a) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 percent or (ii) the commercial lending rate of the Lender, in both cases plus an applicable margin based on the facility usage, or (b) a LIBOR rate determined by the Lender as defined in the agreement plus an applicable margin based on the facility usage. Interest is payable at dates based upon the option selected. In addition to paying interest on outstanding principal under the facility, the Company is required to pay customary fees and a facility fee.

As of June 30, 2018, we had no outstanding borrowings of the Credit Facility, and our borrowing base as defined under the Credit Agreement was $14.3 million.

All obligations under the Credit Agreement are secured, subject to certain exceptions, by a first lien interest in substantially all of the Company’s assets. The Credit Agreement contains covenants that, among other things, require the

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SIDEWINDER DRILLING LLC

Notes to Condensed Financial Statements

June 30, 2018

maintenance of certain financial ratios and include restrictions on incurring indebtedness, creating liens, mergers, sale of assets, equity issuances, investments, capital expenditures, entering into transactions with affiliates, forming any subsidiary or entering into joint ventures and substantially changing the nature of the business in which the Company was engaged on the date of the agreement. The Credit Agreement includes a subjective acceleration clause and has a requirement for the Company to maintain a lock-box with the Lender, so borrowings under the Credit Agreement are classified as current liabilities.

In conjunction with the execution of the Credit Agreement, we executed amendments with the Floating Rate Secured Noteholders and the Amended and Restated Noteholders to adjust their collateral rights to holding second and third lien interests, respectively.

9.75% Senior Notes (Predecessor)

Prior to the Merger, SDI had outstanding aggregate principal amount of $117.3 million of 9.75% senior notes due November 15, 2019 (the “Senior Notes”). The Senior Notes were unsecured and ranked effectively junior to SDI’s secured debt to the extent of the collateral, including secured debt under the Restated Revolving Credit Facility, the Second Lien Notes (Predecessor) and the Third Lien Notes.

Second Lien Note Purchase Agreement (Predecessor)

Prior to the Merger, SDI had outstanding an aggregate principal amount of $52.08 million Second Lien Notes due November 15, 2019. The obligations under the Second Lien Note Purchase Agreement were secured by a second priority lien on all of SDI’s collateral. The Second Lien Notes accrued interest at a rate of 12.0 percent per annum, and interest was payable in arrears at the end of the calendar quarter of each year. The interest accrued under the Second Lien Notes was $2.71 million prior to the Merger.

Third Lien Note Purchase Agreement (Predecessor)

Under the Third Lien Note Purchase Agreement, SDI authorized the issuance of $109.4 million of Third Lien Notes due November 15, 2019. The obligations under the Third Lien Note Purchase Agreement were secured by a third priority lien on all of SDI’s collateral. The Third Lien Notes accrued interest at a rate of 9.75 percent per annum, and interest was payable in arrears at the end of the calendar quarter of each year. Under the Third Lien Purchase Agreement, SDI could pay in kind up to $5,000,000 of interest expense on such Third Lien Notes. The principal balance outstanding and interest accrued under the Third Lien Notes was $114.4 million and $10.5 million, respectively, prior to the Merger.

Amended and Restated Revolving Credit and Security Agreement (Predecessor)

SDI entered into a revolving credit and security agreement (the “Credit Agreement”) and related security agreements in 2012, and following various amendments in 2014 and 2016, the commitment under the amended credit facility was for a $40,000,000 senior secured revolving loan facility (the “Amended and Restated Revolver”) with PNC Bank, National Association (“PNC”). All obligations under the Amended Revolver were secured, subject to certain exceptions, by substantially all of SDI’s assets, as well as a first-priority pledge of all of the capital stock of future subsidiaries.

Restructuring Transactions

During the fourth quarter of 2016, SDI elected to defer interest payments due to the Senior Noteholders and the Second and Third Lien Noteholders and entered into forbearance agreements with PNC, the Senior Noteholders, and the Second and Third Lien Noteholders. In January 2017, the Company and the Senior Noteholders executed a Purchase Agreement whereby the Senior Noteholders agreed to sell the Senior Notes to SDI for $17.6 million.

As part of the Restructuring Transactions discussed in Note 3, the outstanding obligation under the Purchase Agreement of $17.6 million was paid to the Senior Noteholders and the Notes were cancelled, the outstanding obligation under the Revolving Credit Facility totaling $27.2 million was paid and the Amended Revolver terminated, and the Third Lien Notes were exchanged for the Series A Units of the Company.

5. Members’ Equity

The Company is currently authorized to issue four classes of Units, designated as Series A, Series B-1, Series B-2 and Series C and may issue additional classes of Units as authorized by the Board of Directors.

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SIDEWINDER DRILLING LLC

Notes to Condensed Financial Statements

June 30, 2018

Series A Units

The Company issued 950 Series A Units to the Third Lien Noteholders in exchange for the Third Lien Notes in conjunction with the Restructuring Transactions on February 15, 2017. The Series A Units are the only Units authorized that hold voting rights.

Series C Units

The Company issued 96.271 Series C Units in exchange for the Series A and Series A-1 Preferred Stock of SDI in conjunction with the Restructuring Transactions on February 15, 2017.

Distributions are subject to a participation threshold for the Series C Units that applies to certain aggregate or terminating distributions, and the Series C Members will receive distributions in the amount of 5% of distributions in excess of the participation threshold. The Participation Threshold has a value of $350,000,000.

The Series A Units and the Series C Units were assigned an aggregate fair value of $118,242,000 based on the independent valuation of the fair value of the assets acquired and liabilities assumed. The fair value of the equity as of the date of the Merger was allocated to the Series A and Series C Units in the amounts of $116,355,000 and $1,887,000, respectively, in the independent valuation using an option valuation model.

6. Income Taxes

Income Taxes (Successor)

The Company is a limited liability company treated as a partnership for income tax purposes and, as such, is a pass-through entity that is not liable for income tax in the jurisdictions in which it operates, with the exception of the state of Texas, where limited liability companies are subject to Texas margin tax. For the six months ended June 30, 2018, the Company did not have a current liability for Texas margin taxes and recorded a deferred tax provision of $.2 million. No tax provisions were recorded for the period from February 15 through June 30, 2017.

Income Taxes (Predecessor)

SDI provided for income taxes during interim periods based on an estimate of the effective tax rate for the year. Discrete items and changes in the estimate of the annual effective tax rate were recorded in the period in which they occur. The effective income tax rate for the period from January 1 to February 15, 2017 was (1.8) percent.

The effective income tax rates of SDI differed from the federal statutory rate of 35 percent, primarily due to state income taxes, changes in the valuation allowance for deferred tax assets, and permanent differences including the 50 percent deduction limitation on meal per diem expenses. Additionally, as discussed below, the effective tax rate and tax provision for the period from January 1 to February 15, 2017 was impacted by the alternative minimum tax and changes in the deferred tax liability resulting from the Merger.

The Merger was treated as a taxable sale of assets by SDI to the Company, and the fair value as of the date of the Merger exceeded the taxable basis in the assets, resulting in taxable income for the period from January 1 to February 15, 2017. SDI had sufficient U.S. federal and state net operating loss carryforwards to offset a significant portion of the taxable income. A current tax provision of $2.4 million is included in the statement of operations for the period from January 1 to February 15, 2017 and represents the U.S federal alternative minimum tax liability and state tax liabilities for those states where net operating losses were not available.

In assessing the realizability of SDI’s deferred tax assets for the period ended February 15, 2017, consideration was given to both positive and negative evidence of future taxable income and the scheduled reversals of deferred tax liabilities. Significant objective evidence evaluated was the Merger, which was treated for tax purposes as a taxable sale of assets and complete liquidation. As a result of the transaction, all deferred tax assets, related valuation allowances, and deferred tax liabilities were reduced to zero either due to reversal or to write-off as a result of the liquidation of SDI after the Merger, with an offsetting deferred tax benefit of $2.0 million included in the statement of operations for the period from January 1 to February 15, 2017.

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SIDEWINDER DRILLING LLC

Notes to Condensed Financial Statements

June 30, 2018

During the period from January 1, 2017 to February 15, 2017, SDI recognized a decrease in the valuation allowance against federal deferred tax assets of $54.7 million and a decrease in the valuation allowance against state deferred tax assets of $9.2 million, as a result of realization or write-off of the deferred tax assets due to the Merger and complete liquidation of SDI.

SDI had U.S. federal and state net operating loss carryforwards of approximately $347.6 million and $155.5 million, respectively, at December 31, 2016. SDI utilized $109.4 million of the federal net operating loss carryforwards and $12.1 million in state net operating loss carryforwards in the period ended February 15, 2017. The remaining net operating loss carryforwards were written off due to the Merger and complete liquidation of SDI, and all valuation allowances associated with those net operating losses were reversed as of February 15, 2017.

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